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Which is best – ETF’s or binary options?

For investors and traders alike looking to enjoy the prospect of profits on trades, they may be wondering what the differences between binary options and ETF’s are and this article will help explain which a trader should choose.

Essentially, exchange traded funds, or ETF’s, are a low-cost way to invest in stock since they contain a variety of investments including commodities and bonds.

For many traders and investors they are a tax efficient way of investing with a low-cost entry point into stocks.

The trader will take a position on whether an index will fall and rise to generate profits. This method of trading has grown quickly over the past decade and trades in ETF’s are regulated by commissions.

Binary option trading is beginning to take off

However, binary option trading is also beginning to take off with lots of traders new to the markets enjoying quick profits from their trades.

Binary option trading is a process where a trader predicts whether a price for an asset will increase or fall over a set period. The trader does not actually own any equity or fund when making their trade.

The attractiveness of binary option trading is that the trader simply has to make a decision between yes or no about the price of the asset moving. If they believe it will rise, they can ‘put’ or if they think it will fall, then they will ‘call’ the option.

It’s also easier and much cheaper to begin trading in binary options with many binary options platforms offering an initial investment figure for as little as $100.

When a trader makes a trade in a binary options

The other attraction is that when a trader makes a trade in a binary options they will know what their profit or loss will be should the price move. That’s not the case with ETF’s since they are traded like normal shares and the same figures will not be known.

In addition, binary option trading is quicker and cheaper as traders will not be paying commissions or broking fees unlike ETF traders which will see a dent being made into their profits.

The other big attraction when it comes to deciding whether to trading ETF’s or binary options, is that binary options traders can make lots of trades during the day and not run up a big brokerage bill.

They also do not need to have in-depth expert knowledge about assets, commodities, indices or even company results.

A binary option trader can make lots of trades

Finally, while a binary option trader can make lots of trades during the day they can also trade in a wider range of assets including commodities such as oil and gold which makes the prospects of making quick profits increasingly attractive to a growing number of options traders.

With the growing popularity of binary options trading there’s also a demand to find out how traders can generate higher profits for their efforts.

Here at tradebinaryoptions.co.uk we have carried several articles on how new traders particularly can succeed with binary option trades.

This article is aimed at offering several tips that will lead to trading success.

Possibly the most important tip when starting out in binary options trading is to study economic data.

Economic data for binary trading success

This may sound like an obvious idea but many people still do not appreciate how important economic data is to their binary trading success.

Understanding the economic data that’s already available could be crucial for success and it will stand the trader in good stead when new data is released because this often has an impact on markets.

Essentially, knowing and understanding what economic news means for markets or countries could mean huge trading successes in a very short time as a result.

The next most important tips for someone new to binary options trading is to manage your risk.

While the huge possible gains may be attractive, it should be remembered that these are impossible without high leverage rates.

However, with high leverage comes high risk, so for a trader who has a £1,000 account and opts for a 100:1 leverage rate then you are risking all of the capital with that leverage rate.

Binary options trading plan

In conjunction with managing risk is to understand how to stop losses mounting up and prevent your binary options trading plan from being undermined.

It’s essential that to continue training that you identify the maximum loss you are prepared to take per trade and per day.

By doing so you will live to trade another day should you suffer big losses. Remember not every trade will be a success.

Other traders decide to limit their trades to four or five a day which helps to protect their account balance.

Another important tip when it comes to binary options trading is to know and understand your markets.

Binary options are available on lots of assets

Binary options are available on lots of assets as well as FX pairs but the trader needs to understand the fundamental market data in a bid to be successful.

This means not trading in currencies they have no knowledge in, particularly in small countries, since this involves specialist research before trading.

Finally, it’s crucial that a trader new to binary option trading has a plan and sticks to it.

Their trading plan will limit how many trades they make, how much they are prepared to leverage. This trading plan will also need to take into account various time zones for trading and whether they are looking for a short or long-term trades.

Even though they are a fairly new form of investment vehicle, binary options are growing quickly in popularity for the potential high returns they can bring.

These returns are possible over a short period and also provide for an exciting investment environment.

For anyone wanting to trade in binary options they need to understand what the pros and cons of binary trading involve to ensure success.

So what are binary options?

It’s important to remember that binary options trading does not involve buying assets; there are no commodities or shares that change hands.

Essentially, the binary options trader will be making a prediction that the value of a particular financial asset will fall or rise.

By predicting correctly, the binary options trader can earn a lot of money but it should also be appreciated that by predicting incorrectly the trader will make a loss.

One of the biggest pros for trading in binary options is that investors don’t need that much money to begin trading, unlike many other investment vehicles.

Trading in binary options

This means that trading in binary options can begin with just a few hundred dollars which is a big pro for many people.

The next biggest attraction for traders is the potential to earn much higher returns than other trading options.

For instance, financial experts will say that by trading in commodities, stocks and other financial assets, a trader will be doing well to earn returns of around 10% over a few months.

By trading in binary options, the potential of earning 80% in returns is a realistic prospect.

Another major pro for trading in binary options is that it’s a fast-paced environment; trades can be done over a few minutes rather than over a few days, weeks or months for commodity trading.

Trades in binary options

Most trades in binary options expire within several hours which helps to attract a wide range of people to binary trading.

Finally, the other big pro for trading in binary options is that the management of risk is much simpler. This is because the trader will know how much they can earn or lose when they make the trade.

There are some fairly obvious cons to binary options trading and major one is the fast-paced and exciting environment; the short expiry times of the trade can make it difficult to predict profits over a period of time.

Another drawback is that the market is being increasingly regulated because there are worries over it being such a new investment vehicle that potential investors face scams and fraudulent brokers.

Work with a regulated binary options broker

For this reason it’s important to work with a regulated binary options broker and spending the time initially to find a broker you like, and who has a platform you can understand, will be time well spent.

This last piece of advice is crucial because research will be important and binary options trading is a rewarding and exciting way to earn money – but as with all investments the opportunity to lose money is just as great too.

This means that they will need to research thoroughly how binary options actually work and then find a trading platform they can utilise.

In addition, as we have explained on this website previously, finding a suitable binary options broker is also crucial to success and profits.

The joy for those starting out in binary options is that there are only two choices for a trade – whether the asset will increase in value or decrease.

We have also pointed out that with experience, there are more choices but not all brokers offer this facility.

Test your binary options trading strategy

So, once a binary options trader has found a broker and a platform that they like, it’s time to test their binary options trading strategy.

Hopefully, before the newbie trader begins risking their own cash, they will have traded in real-time on a platform using fake money. This gives real-world experience that is hard to replicate.

This practice will also reveal whether a trading strategy is robust and is going to be successful.

It may appear to those starting out that formulating a successful trading strategy is a difficult thing to do but in reality it isn’t.

It’s also important to remember that a successful trading strategy will also enable the trader to meet their financial targets and return impressive profits.

Possibly the first issue for a new binary options trader to decide is which assets they will like to trade in.

Having a strong understanding or knowledge about any asset types will be of huge advantage and they should focus on those areas.

Others may understand company earning statements and know how to react accordingly.

Binary option traders may focus on currency and commodity markets

Other binary option traders may decide to focus on the currency and commodity markets where there are fluctuating prices to predict.

As part of the strategy, a binary options trader will need to monitor the news for major events, be aware of when central banks conduct their meetings and keep an eye out for weekly reports on commodities.

This may seem like a big task but there are various services which will help in sifting out the material to find the information a trader will need.

Another important aspect when it comes to testing a trading strategy is to think very carefully about the trading timeframes which will bring success.

Those new to the sector need to appreciate that some binary option trading brokers will offer trading windows of as little as 30 seconds.

The trading time is decided before the actual trade is opened and is crucial as part of the strategy for success.

Decide on timeframes before trading

Again, deciding on which timeframes to use will be largely dependent on the types of assets that are being traded.

Many binary options traders like the fast-paced approach that can come with having a trading time frame of 60 seconds, for instance.

Others prefer to use a longer term approach and will opt for monthly or even weekly options.

Once a trader has decided on the timeframes and the assets they want to trade in, they will need to decide on which direction a price for those assets will be going.

This means that binary options traders will need to work from economic reports or charts.

Those who are good at maths and statistics will probably enjoy charts more whereas those who can read economic data will find that the reports will be more rewarding.

A trader will need to appreciate economic data

Essentially, for a trade to be successful the trader will need to appreciate economic data, the valuation of the asset and to pick an entry and exit price point.

Most binary option traders will effectively use both strategies for success.

All of this may appear daunting for those new to binary options trading but these are careful and necessary steps for anyone new to the markets and who wants to make a profit.

Indeed, within the trading element, there are some who will want to be conservative and diligent in making their trades to exploit opportunities.

Others, will have a binary options trading strategy that is aimed at earning higher rewards but this means taking more risk and will need to be more aggressive in their approach to earning money.

Whichever binary options trading strategy is the most suitable for you, then you should enjoy success because the markets can cater for all types of investment goals and all types of investment styles.

It’s important that the strategy you choose for trading in binary options is one that you will be happy with and reflects your own trading characteristics.

While trading in binary options does appear at first glance to be an excellent way of generating profits there’s more to it than many people realise.

Indeed, as we have previously explained on this website having a binary options trading strategy in place and undertaking some level of training will lead to profits.

One way to gain the necessary experience is to use a demo trading account to put a strategy to the test in real world trading.

The real attraction however, to using a demo trading account for binary options is that a new trader can play with fake money and not risk losing any investment cash.

While early success may be tempting, a long-term strategy will be needed to ensure that any financial goals are realised.

The first step on the road to success in binary options trading is to select a broker.

Finding a binary options broker

Finding a binary options broker is not difficult, there are lots out there but care should be taken because some brokers are not regulated by a relevant financial authority.

The other issue to remember that while binary options trading is a simple way of making money in assets since there are only two choices to make – that is whether the asset’s price will increase or fall – not all brokers trade in all assets.

As part of a new binary option trading training plan, a trader should research thoroughly and specialise in their assets and then find a broker who can deliver the best platform for success.

And even when a trader has signed up to a binary options broker, they should still keep their eyes open for other opportunities with other brokers; for instance, some may offer a better rate of return.

Essentially, when researching the best binary options broking platform is to find one that is easy-to-use.

It’s important that their software does not take a long time to learn to it and it will be of great help.

Be aware too that the platform cannot afford to slow down because wasted precious seconds could mean trading losses.

Does your binary options broker have the assets

The research will also mean that the new trader should analyse whether the broker has the assets necessary for trades to be successful – if they don’t then you need to find another broker.

As hinted at previously, the rate of return is crucial for profitability.

Not all binary options brokers offer the same rates of return, some offer 83%, some will offer 84% while others will offer 85%.

Even though these differences are only 1%, they could make a big difference in how much profit is made.

In the hunt for success at binary options trading, it’s all about profitability and it doesn’t make trading sense to sacrifice any of that profit to a broker.

Selecting a broker for online trading in binary options

Another important issue when selecting a broker for online trading in binary options is to find one that offers more than just the standard ‘put’ and ‘call’ options.

That’s because as a new trader who enjoys success, they will then develop their trading strategy and they will need a broker who can match their growing demand in choice.

One reason for finding a broker who offers more options is that this will boost profitability.

As a new trader in binary options, is also worthwhile starting out with a broker who offers rebates on trades.

There are brokers who have excellent platforms to learn on and will offer up to 15% back on an unsuccessful trade.

When starting out, this may be something that a new trader may want to take advantage of while others will not.

Utilise the services of a binary options broker

Finally, and we cannot stress this enough, it’s important to utilise the services of a binary options broker who offers something that you want.

Depending on the trading strategy that has been developed, this may mean that a new trader decides he’s going to use more than one broker. This is an acceptable way of trading.

As we have mentioned previously, not all brokers offer the same level of return so one platform may offer more on a currency, for instance, while another platform will offer more on commodities.

Also, take time to look for the best bonuses for new clients though be aware you may have to do invest a large sum initially.

The growing popularity of binary options trading is still continuing with its sheer simplicity being a big draw for many potential traders.

Essentially, there are just two types of options when it comes to binary option trading: traders will ‘call’ when they believe the price of an asset will increase, or ‘put’ if they think the price will fall.

This makes learning binary option trading very simple because there’s only one of two options to choose from.

However, it soon becomes apparent that trading in binary options is a high-risk way of trading.

Get the decision right, and the trader will see a profit of up to 85% returned to them but call it wrongly and they risk losing all of their money.

While many new binary option traders will plunge straight into trading, the best way is to take their time and learn the skills that are necessary for trading success.

This means they will need to understand the technical side, market sentiment and market data.

Begin trading in binary options

For many people, the best way to begin trading in binary options is to start with a demo trading account.

Many binary option broking websites will offer such accounts where those new to the markets can practice their trading skills in real time.

The best reason for following this advice is there’s no better experience than having to do real trading; there’s only so much you can learn from reading a book and the practice is often very different in reality.

The attraction for using a demo trading account is that you deal with fake money so you can afford to lose it.

However, the real attraction for using a demo trading account is that you will be using the same platform for when you decide to trade in binary options for real.

By choosing a suitable demo trading platform, a new binary options trader will effectively eliminate the learning curve in having to learn how the platform actually works.

Demo trading accounts vary greatly

As with many things in life, the demo trading accounts vary greatly between brokers and not every broker will offer a demo platform.

Many brokers do, however, and it’s this level of practice which could prove to be the secret to success in binary options trading.

One downside to using a demo platform is that some brokers will insist that the newbie has a short time period for use. Some are for as little as 72 hours.

However, once a newbie begins trading in binary options they will soon appreciate that the 72 hours grace period is, generally, long enough to work out how the systems work and how to make a profit.

It would be a good idea to have a trading strategy in mind before beginning the trial and appreciate that the new trader will not be making lots of money initially and they will need to still learn their trade.

This also means that when a trader comes to make their first binary options trade they cannot be unprepared. Failure in the first few hours will not only be off-putting but may cost all of the money a trader was prepared to risk.

Binary options trader needs a money management system

This means a binary options trader needs a money management system in place to ensure they are not risking too much, or indeed too little, while they learn the necessary skills.

It should be appreciated that it can sometimes take several months to develop a successful trading strategy and to find the markets or assets that the trader will be successful in.

Remember too that the asset a trader decides to specialise in does not need big movements in price to rack up a big profit.

Indeed, in some currencies a tiny movement of 1/10 of a pip will still generate cash.

The other issue that comes up with creating a binary options trading strategy is to decide how many trades a day will lead to success.

Some traders only make a handful of trades and make money while others trade more frequently. It’s important to remember that it’s not about the quantity of trades but about the quality of the decision-making behind the trade.

This also means that a binary options trading strategy really does need some financial goals behind it; setting a weekly profit target is a good idea because this will determine how many trades are needed to reach that goal.

It’s the brainchild of Master Option and the people behind it have lots of binary options industry experience.

The firm says their new platform has been designed to offer a highly productive binary options trading experience while being easy to understand.

In addition, says Master Option, the experience will not be matched by anything else in the industry and a wide range of assets, trade types and educational materials will be available.

The marketing director of Master Option said: “We strive to bring joy and profit together with a transparent, simple and engaging platform.”

The new binary options trading platform has been designed with the expert traders, as well as beginners and intermediate traders, in mind.

Starting out in binary options trading

For those starting out in binary options trading, there’s a wealth of educational material available in video and print formats.

The aim is to help a beginner trader become an expert quickly while those with more experience will find assets and trade types and information on managing risk and loss exposure.

The new platform has been designed for ease-of-use with no unnecessary data clogging its ambitions though specific data, risk management tools and trade types will also be available.

The main aim however from Master Option is for a platform that delivers profitability to all levels of traders with high returns and expiry times from just 60 seconds.

This will, they say, give a trader an increased ability to appreciate massive profits from their efforts.

Indeed, they say their new trading platform offers a range of features that are not found anywhere else.

60 second expiry period on binary options trades

The 60 second expiry period is only offered by a select few rivals and the site also offers a signals service.

This means that traders will receive alerts when the system recognises profitable trends in the market.

In addition, users of the binary options trading platform will also be able to access an economic calendar to help pinpoint events which could lead to a profitable trend.

Master Option say they have a quick and easy system for withdrawals and deposits on a secure trading platform with return rates being as high as 85%.

More binary options and FX brokers blacklisted

Meanwhile, the growing polarity of Forex and binary options trading has led to a another slew of companies being blacklisted by the Belgian financial watchdog.

The Financial Services and Markets Authority (FSMA) has updated its list warning of firms that Belgian investors should be wary of.

It’s new ‘blacklist’ of unauthorised financial services providers has now been published and features dozens of binary options and Fx brokers.

The Belgian financial watchdog has also highlighted to investors that binary options are highly speculative and have significant risk.

Investors are being warned that they could lose their entire investment, or even more.

Beware of these binary options trading platforms

The FSMA warning also states that despite the website of these trading platforms appearing to be from serious firms they are, in fact, being used by fraudsters who do not have the relevant financial authorisation.

Guide to finding a binary options broker

The first thing to appreciate is that the platform should be easy-to-use; everything should be clear and easily understood.

Even though binary option traders need to sift through lots of news and information, there can be too much on offer for you to trade successfully.

The next most important issue is that the platform should be able to deal with the fast-paced world of binary options trading – you cannot afford for a platform to slow down at crucial moments.

That’s because this will cost you money.

The options trading platform needs to have assets

Another crucial point to remember is that the trading platform needs to have enough assets to be trading in. If you are interested in Forex trading then you need to see that they have a variety of currencies on offer.

A lack of currencies, and even commodities, means you will be wasting your time.

Making money is the whole reason why binary option traders begin what can be a stressful but thoroughly enjoyable way to make money.

This means that you should select a binary option broker who is offering the best rate of return – they do vary but remember there’s a big difference between 83% and 85% for a rate of return.

Rebates offered on unsuccessful trades

Having said that, some brokers will offer rebates of up to 15% on an investment for an unsuccessful trade.

Not all brokers will offer this but many binary option traders will want to help protect their losses with this option.

As you develop as a binary options trader, you will be needing a platform that will feel right with the chance of taking up new opportunities other than the standard put or call options.

Finally, as you develop your binary options trading strategy it may become apparent that you need more than one broker and there is an argument for using more than one, especially if they offer different rates of return on currencies and commodities.

A firm that runs a string of popular trading apps has launched a web version of their binary options news section.

ITM Financial says its new site is for all currency and binary traders and is a web friendly version of the news site that appears on their apps.

Currently, the firm offers trading apps for the US stock market as well as the forex in the market and the binary option signals market.

The apps are available for free from Apple iTunes and Google Play.

The news section will appear on binaryoptions.me with constant updates for binary traders.

Market updates and tips for binary trading

The firm’s chief executive, Curt Dalton, said: “Most websites are just sales pages and there’s no real good place that gives traders the market updates and tips for binary trading.”

He added that the new section will pull in articles from their team of writers and websites and include Forex signals for currencies as well as stock market updates.

The firm says it now has everything necessary for the mobile trading market and the new applications will work effectively on laptops and desktop computers and they expect the app to be extremely popular.

The news will be pulling in information from a variety of sources including binaryoptionstradingITM.com, forexsocialsignals.com and forexsignals.me.

In addition, the app will also give binary trading ideas for the day, market overviews and stock market updates as well as binary options trading recaps.

Consultation on binary options trading ends

Meanwhile, a consultation on government proposals to move the regulation of binary options trading in the UK from the Gambling Commission to the Financial Conduct Authority (FCA) has come to an end.

One reason for the move is that the Gambling Commission only regulates a firm involved in binary options trading if it has equipment located in the UK.

In other European Union countries, the trades are considered as financial products rather than gambling ones.

So the proposed move would bring the UK into line with common EU practice which would means they need to be regulated by the FCA.

The other issue is that traders new to the binary options market are apparently unaware that the sector is not being regulated by the financial watchdog which means they are investing money without the standard protections many are expecting. A decision on the switch between regulators is expected later this year.

The popularity of binary option trading is growing quickly and here are some basic tips to make money this way.

Essentially, trading in binary options leaves a trader with one of two options – to put or to call.

This means that the trade is predicting whether the asset, whether it is stock or foreign currency, for instance, will rise in value, or fall, within a set time frame.

The first tip is to find a trading platform that you are comfortable with and which will allow you to trade in more than just binary option trading.

For instance, a binary options trader may well develop the expertise to do well in Forex trading and want to focus on other trades within that sector.

Signing up to a binary options trading platform

Another tip when signing up to a binary options trading platform is to be aware of any signing up bonuses. Some of these are extremely generous but be aware of any catches if you do well financially in your trades before the bonus period expires.

Trading Forex can be a volatile market and sometimes nerves of steel are needed. The potentials for reward, however, are huge.

Successful Forex binary option traders need to keep an eye on any developing news stories and be aware of economic news that may impact the foreign currency markets.

Anyone thinking of becoming a binary options trader should also be wary of any tips and gossip that are offered in forums and online websites.

Another tip for developing a successful trading strategy is to use a platform that will allow early exit trades.

Exit binary option trade to cash in profit

As mentioned previously, binary options are offered within a set time frame but some traders may want to exit that timeframe early to cash in their profit. Not every platform allows this to happen.

It’s also crucial to appreciate how money is made through binary option trading and it’s purely down to the buying and selling price of an asset.

Obviously, if the asset falls in value, the investor will lose money but they stand to make money, technically a lot of money, should the asset rise in value.

In order to do well, judgement is key. The trader will need to appreciate how long they need to hold the asset for before cashing in for a profit.

This means that binary option trading can be a stressful way to make money but it can also be an exciting and rewarding way to make money too.